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Post-Lockdown Home Buying Guide For First-Time Buyers

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The pandemic has not only changed our lives drastically but it also left its mark on the process of buying your first home. 

The transition from office to WFH  made many of us realize that you don’t need to live so near to your workplace. Maybe the lockdown made you crave a garden, green open spaces, or affordable living closer to home.

No matter what effect COVID-19 had on your house buying journey, this first time buyer guide will help you. It will show you programs that will help you get on that ladder and save you a lot of money in the process. We’ll also cover the most important steps for buying your first home – from start to finish. This is house buying post-lockdown made easy.

What does the housing market look like now?

The housing market, just like any other market, is influenced by supply and demand. If demand is high and supply is low, prices are going to increase. How does this play out on the housing market?

Having the security of living in your own home was already a life goal for 54% of people. The pandemic pushed need to the forefront of our minds for many of us. However, while the demand for houses increased, the supply could not follow mostly because of lockdown restrictions. 

Turning back to the laws of supply and demand, this means that prices are increasing. In fact, in March 2021 the average asking price was up 2.7% compared to the last year.

 

House_Price_Index_Infographic
House Price Index July 2020 – June 2021

 

First-time buyers are a big part of the rise in demand. The first weeks of 2021 saw a 5% jump in the number of people looking to make their first step on the property ladder. Moreover, the number of house sales that are in the typical price range for first-time buyers (from £100,000 to £250,000) rose by 18% since the beginning of the year. 

What does this mean for you? With new governmental aids on the horizon, demand is most likely going to increase even more. The ease of lockdown will, however, mean a breath of fresh air for sellers – we can expect more houses to come onto the market. 

Even with this projected rise in supply, housing prices are expected to increase. Luckily, there are some options available for first-time buyers that can make buying your first home a bit easier. 

New/Updated Governmental Aids

As a first-time buyer, you have quite a bit of help you can take advantage of. Some have requirements (e.g. aid is only valid new builds), some are open for everyone. Take a look at our top three Government programs for home movers and decide which one works best for you.

1) 5% Deposit Mortgages

What exactly is this option?

  • The government offers a guarantee on 5% mortgages

What do you get?

  • The chance to have only 5% of the asking price available in cash

Limitations:

  • The house to-be-purchased can’t cost more than £600.000

The average deposit in the UK is 22% of the house price. At the beginning of 2021, there were only a couple of low-deposit mortgage options available for us, aspiring homeowners. No wonder, the average time it takes for a first-time buyer to save for a deposit is 8-9 years

Fortunately, the government recently promised to take action to reverse this trend. On March 2021, the governmental guarantee on 5% deposit mortgages. This means that you won’t need to have as much cash on hand to buy your new home. 

The 5% deposit aid is set to run from April 2021 to December 2022 – quite a long period. The only limit comes from the house price. The threshold will be £600,000 – not a significant restriction if you ask us.

2) Help to Buy: Equity Loan

What exactly is this option?

  • An equity-based loan offered by the government to help first-time buyers step on the ladder

What do you get?

  • You can get up to 20% (15% in Scotland) of the house price as an equity loan from the Government. This means that the Government will be part owner of your house. The advantage over a regular repayment mortgage is that costs are lower and you making early repayments are easier and cost-free.

Limitations:

  • In all regions, you can only purchase a new build with the Help to Buy scheme. There are also price thresholds for the houses that differ based on your location. For more info, check out our guide.

The rising deposit requirements from lenders and the increase in house prices meant that it was more and more difficult to buy your first home. That is why the Government created the Help to Buy scheme. Recently, the program was prolonged and will run at least until 2023

What do you get exactly? You can borrow up to 20% of the total asking price of your dream house. (In Scotland, the maximum is 15%.) This way, you can reduce the repayment mortgage you need to take out. You can save a lot of money if you max out the Help to Buy as the costs of the equity loan are lower than the rate you’d get elsewhere. 

Check out our guide for more details and region-specific information about this scheme.

3) Stamp Duty Holiday

(Land and buildings transaction tax in Scotland and Land transaction tax in Wales)

What exactly is this option?

  • A reduction to the tax you’d normally have to pay after buying a house or a piece of land.

What do you get?

  • The threshold at which you would need to start paying this tax is reduced. This means that you’ll have to spend less money on this tax.

Limitations:

  • After the 30th of June 2021, only first-time buyers will benefit. The threshold differs based on your region. For more info, check out our guide.

Stamp Duty is the tax that you pay after purchasing land or property. As this is a progressive tax, you only need to pay it if the purchase price is more than a specific amount. The tax rate differs based on which bracket the house price falls into. 

The government issued a Stamp Duty Holiday at the beginning of the pandemic. This means that UK residents (except for Scotland) don’t need to pay this particular tax until the 30th of June if the house price doesn’t surpass a specific sum (England: £500.000, Wales: £250,000). 

In Scotland, only first-time buyers benefit from the higher threshold for this tax. They are only taxed on the house price above £175.000. England and Wales will go back to a similar system from July. The aid will also only be available for first-time buyers but the limit will differ (England: £300.000, Wales: £180.000).

For more information, check out our guide on this topic. 

How Does The House Buying Process Look Like In 2021?

House Buying Guide - Couple happily looking at laptop next to staircase

Now you know how many financial aid options you have available as a first-time buyer. We bet, you can’t wait to take advantage of these, right? 

Saving some hard-earned money is tempting. The house buying process can still seem overwhelming though. After all, it is not only fun and games…

From planning your mortgage to legal requirements, you need a solid overview of the whole process. Don’t worry though, this next section will help you understand the most important steps. 

Step 1: Get Your Finances In Order

Before you start looking for a house or applying for a mortgage, it is important to lay the groundwork. This will help you get a better understanding of the kind of house you can afford and can also help you get a better mortgage deal.

The most important steps you need to take are the following:

  • Reduce your expenses in the next 3 months

Lenders take into consideration your spending in the last 3-6 months. To get a better deal, push big-ticket items to later.

  • Understand all the costs of buying a house

Unfortunately, purchasing a property is gonna cost you a lot more than just the asking price. You need to consider the legal fees, taxes, and additional mortgage costs as well. For a summary of these additional costs, check out our guide on the topic. 

  • Know how much money you have for the deposit

Once you know all the costs, you need to look at the money on hand – money that you can also easily turn into cash. Subtract the costs we mentioned above from this amount and you get the deposit that you can calculate with.

  • Check your credit score

Your credit score will also play a huge role in what mortgage you will be accepted for. The higher your score, the more reliable you seem to lenders. You can increase your credit score by paying off any current debts that you have and paying your bills on time. Check one of the free online credit score calculators to see your score.

  • Collect the necessary paperwork

Applying for a mortgage requires a lot of paperwork. You’ll need to verify your identity and show your income and expenses. The most important document you’ll need is your payslips for the last 3 months, your bank statements, and your recent bills to verify your current address. 

  • Calculate your total budget for your new home

Now you know your max deposit, your credit score, and your estimated income & expense level. You are ready to check one of the online mortgage calculators. Input your average monthly expenses and your income to get an idea of the amount of mortgage you can qualify for.

Step 2: Set Your Priorities

Once you know your estimated budget, you can start planning your house search. The most important aspect to consider here is the location. Consider your most important places. Do you want to be close to work? Maybe you crave your family’s proximity? How important is nature to you? 

Highlight the neighborhoods that fit your criteria. Check their approximate house price levels. Are they within your budget?

Next, create your must-have lists. Write a set of features that a house needs to have to qualify for your maybe-pile. Do you want a garden? Maybe having at least 2 bedrooms is a must for you? 

Be smart about this though. Don’t add everything to your must-have list. Stick to about 5 items and add the rest to your nice-to-have list.

Once you know your priorities, it is time to start browsing. Set up search alerts for the neighborhoods you flagged and input the features from your must-have list as filters.

Step 3: Find A Mortgage Advisor

There are a lot of things you need to consider before you choose a mortgage provider. 

These include: 

  • The rates
  • The mortgage period
  • The loan terms
  • Requirements for the deposit
  • Whether they require a buildings insurance
  • Other mortgage fees

On top of this, there are different types of loans you can choose from. Finding the right mortgage can quickly get very complicated and stressful. 

That is why we suggest hiring a mortgage broker. They will show you the options you have available and reduce some of the paperwork for you. 

Make sure that the mortgage broker is a whole-of-market broker so they don’t just offer you loans from a select few lenders. Furthermore, it is also wise to ask them about how they get paid. Some brokers get commissions from a select group of lenders so they might steer you towards them.

Step 4: Get An Agreement In Principle

Your next step is going to be to get an agreement in principle. Your mortgage broker can also help you with this. An agreement in principle will show you a rough estimate about the mortgage you can calculate with. Keep in mind though, that this is not a binding offer.

Why do you need it? With the agreement in principle, you will be more sure of the budget you have for the house. Furthermore, it will also show the estate agents and sellers that you are a serious prospect. It can come in handy during the bidding stage.

Step 5: House Viewing

After you started the financial process, comes the fun part. You get to see houses finally! The lucky ones will walk into a property and immediately know it was meant for them. Others need a couple of visits to imagine their lives in a house.

No matter what you belong to, it is important to go into the house viewings level-headed. It is your chance to get the info that an online listing will never tell you. 

The most important questions you want to ask the seller or the estate agent are:

New Builds Second-hand Houses
How long has the property been on the market? Why is the owner selling?
How many offers have they had? Has the house repeatedly changed hands?
What is included in the sale exactly? (E.g. sometimes you get an appliance allowance) How long have the owners lived there?
How much is the Council Tax?  How long has the property been on the market?
How much will your utility bills be? How many offers have they had?
What is the area like? How much is the Council Tax? 
How much is the reservation cost of the property? How much will your utility bills be?
Has the property been renovated?
What does the estate agent know about the neighbors?
What is the area like?

A level-head is also important price-wise. Even the house has stolen your heart, try not to let your enthusiasm show. Estate agents might use this against you and play on your willingness to pay more. 

Otherwise, the number of times you view your property is up to you. We suggest seeing it more than once. If you are buying a second-hand home, you might want to also consider hiring your surveyor. It can highlight any red flags about the building and save you a lot of money in the long run.

First Time buyer advice

 

Step 6: Put In An Offer

If you like the house and are satisfied with the answers to the questions, it is time to put in an offer. Easier said than done, right? What if you overbid and waste money? Or worse, what if your offer is too low and someone else gets your dream house?

The pandemic made all of this more confusing. As we mentioned, demand is higher so you can expect more competition. That said, you don’t want to rush into making your offer.

The questions above already give you a good idea about the direction of your bid. If the estate agent told you that there are multiple people interested in the home, you might need to bid higher. 

On the other hand, if the house has been on the market for a longer period, you might consider a lower bid. Same if the owner wants to sell quickly. 

The most important thing is that you make an educated decision about your offer. Consider the answers you got from the viewing. Look at the prices of similar houses in the area. 

If you have your end-figure, let the estate agent know. Estate agents are obligated by law to pass all offers to the seller. It is a good idea to put the offer into writing as well. 

Step 7: Arrange A Solicitor

It is time to set the legal groundwork of the house purchase in motion. This will be handled by your solicitor or licensed conveyancers. A good solicitor will keep you in the loop and can give support and provide helpful explanations about what sure can be a stressful legal process. 

What will they be responsible for exactly? They will 

  • Manage the contracts
  • Handle the exchange of contracts
  • Provide you with legal advice
  • Arrange the Land Registry
  • Transfer the funds for the purchase

We will warn you, a solicitor can be expensive. Their fees usually range from £850 to £1,500. So make sure you choose a good one. How? Ask around first. Maybe one of your friends can recommend one in the area you are looking to buy a house in. You can also ask your mortgage broker or lender representative. Since they work in the same industry, they might know a trustworthy solicitor as well.

Step 8: Exchange The Contracts

Once your offer gets accepted, you need to decide on a completion date with the seller. This will be the day when you will finally receive the keys. 

Once this is settled, it is time for your solicitor to shine. They will prepare the contracts, add in the completion date and arrange the exchange. From this point on, the contracts are legally binding. If any of the two parties pull out from the deal, financial repercussions will follow. The defaulting party needs to reimburse the other side for any costs incurred. 

A frequent question is the number of days that pass between the exchange and the completion. It usually takes 2 to 4 weeks. Seems like a long time but you will need it. You will need to pack up everything you own and arrange the move.

Step 9: Completion & The Final Steps

The final episode of your house buying saga is the completion. This is when the ownership of the property officially changes hands and you get the keys. Yep, it is moving time!

The solicitors also play a major role here. They will check whether everything is fine with the funds. If it is, the seller usually gives the keys to the estate agent. You can expect to receive them from the agent at around 1 PM the same day. 

After you are done with the tiring glory of unpacking in your new home, you need to turn back a bit to the adulting side. Being a new owner comes with new responsibilities such as paying the Stamp Duty (Land and buildings transaction tax in Scotland and Land transaction tax in Wales). The house also needs to be registered with the Land Registry. 

Summary

All in all, with or without pandemics, house buying is fun and stressful at the same time. Luckily, as a first-time buyer, you have great opportunities. The government wants to keep the property market going in the face of COVID. From 5% deposit mortgages to the extended Help to Buy scheme and Stamp Duty Holiday, you have a lot of options to save some money.

Check out Getting On The Ladder to find the home of your dreams. Browse through the gorgeous new build properties and take advantage of the governmental aids. 

first time home buyer guide

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